Borders Group received approval for a bonus plan after accepting revisions that tied the bonuses to recoveries by the company’s creditors and success in reducing rental leases for the company’s stores. About 40 participants, 15 in the Key Employee Incentive Plan and 25 in the Key Employee Retention Plan, will be paid bonuses ranging from 40% to 125% of their base pay if certain performance standards are met. 

 

Bloomberg reports that the low range of bonuses will be paid if Borders manages to negotiate $10 million in annual rent reductions for the company’s store leases. Upper management will be able to get bonuses equal to 125% of their base salary if they can recover more than $95 million for unsecured creditors.

 

According to a source quoted by Bloomberg, the payout for the revised Borders bonuses would likely be about $6 million at the high end if all the conditions were met. This represents a sizable reduction from the company’s original plan to pay $8.3 million (see “Decision Due on Borders’ Bonuses Due Tomorrow”). The original plan was initially rejected by the bankruptcy court judge (see “Borders Bonus Plan Rejected”).

 

There is no guarantee that the Borders Group, which remains in Chapter 11, will recover enough to pay the bonuses. While the tough overall economy may make it easier to negotiate rent reductions, it has also produced a tough bookselling environment, and Borders is well behind its competitors Amazon and Barnes & Noble in its ability to profit from the growing market for e-books.